Retail Sales Declined 0.8% in January

 
Implications: Retail sales fell big in January, the second large monthly decline in a row. But this is not the end for the consumer. Gas prices plunged again in January, so sales at gas stations fell 9.3%, the largest drop for any month since the Panic of 2008. Regardless of how it affects top-line retail sales, the drop in gas prices is good news. Every one cent decline in the price of gas saves consumers about $3.7 million a day (so, today, consumers are saving more than $460 million a day versus 6 months ago). Shoppers are now able to take that money and shift their purchases elsewhere. Although they might not spend all of it immediately, it looks like consumers are starting to use some of this extra money to dine out more. Sales at bars and restaurants are up 11.3% from a year ago, the best year over year growth since 1989! And if we just look at retails sales excluding gasoline stations, they were up 6.6% from a year ago, the best reading since early 2011. "Core" sales, which exclude autos, building materials and gas, bounced back in January after slipping in December and were revised higher for previous months. Plugging these data into our GDP models suggests real (inflation adjusted) consumer spending will be up at a Plow Horse 2.5% annual rate in Q1. Nonetheless, we expect roughly 3 million more jobs in 2015 and wage gains to go along with them, which will translate into further spending growth in the year ahead. In other news this morning, new claims for unemployment insurance rose 25,000 last week to 304,000. The four week average declined to 289,750. Continuing claims for regular state benefits fell 51,000 to 2.35 million. We expect another month of solid job growth in February, with payrolls climbing around 250,000.

Click here for PDF version
Posted on Thursday, February 12, 2015 @ 10:17 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.